Caixin
Jan 16, 2020 08:42 PM
WORLD

Update: U.S. and China Sign Phase One Trade Deal

U.S. President Donald Trump speaks during a signing ceremony for the U.S.-China
U.S. President Donald Trump speaks during a signing ceremony for the U.S.-China "phase-one" trade agreement in Washington, D.C., U.S., on Wednesday, Jan. 15, 2020. Photo: Bloomberg

The eight-chapter phase one deal covers a range of areas in U.S.-China trade and economic relations, including intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange, according to the full text released by the two sides after the signing ceremony on Wednesday.

The agreement, entitled the Economic and Trade Agreement Between the Government of the United States and the Government of the People’s Republic of China, includes specific commitments from China to buy no less than $200 billion in American goods and services over the next two years, and to establish dispute settlement and high-level consultation mechanisms during the implementation process.

The first phase will take effect within 30 days of the signing, and either party has the right to terminate the agreement by providing written notice to the other. There has been no announcement of a timetable for the second phase of the talks.

On intellectual property, China promises to protect trade secrets and confidential business information in areas such as pharmaceuticals, copyrights and patents. Beijing will release an “action plan” to implement the commitments within 30 days of the agreement taking effect.

China and the U.S. have also agreed not to “require or pressure persons of the other Party to transfer technology to its persons in relation to acquisitions, joint ventures or other investment transactions.” Separately, China commits to refrain from directing or supporting outbound investments aimed at acquiring U.S. technology pursuant to industrial plans.

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China agreed to further open its food and agriculture markets to U.S. products, including genetically modified organisms. China will purchase and import at least $40 billion of U.S. food, agricultural, and seafood products on average annually, for a total of about $80 billion over the next two years.

The two sides also addressed trade and investment barriers in the financial industry. China has committed to provide more market access and more friendly regulatory treatment for American financial firms, including those in banking, credit ratings, electronic payments, financial asset management, securities and insurance.

For example, within five months after the deal takes effect, China will allow branches of U.S. financial companies to provide securities investment fund custody services, while the U.S. affirms that current pending requests by Chinese institutions, including by CITIC Group, will be reviewed expeditiously.

China and the U.S. further agreed to increase the level of transparency and stability of their macroeconomic and currency policies, in which the two sides commit to achieve and maintain a market-determined exchange rate regime and refrain from competitive devalutions.

The agreement also specified Chinese purchases of American goods and services, including those in the manufacturing, agricultural, energy and tourism industries. For the two-year period from January 1, 2020, through December 31, 2021, China has agreed to increase its purchases of U.S. goods and services by no less than $200 billion from a 2017 baseline, including $77.9 billion worth of manufactured goods — the most of any single category.

Finally, Beijing and Washington agreed to establish a dispute settlement mechanism, called the Bilateral Evaluation and Dispute Resolution Arrangement, to resolve potential disagreements during the implementation process. The two sides will also engage in regular high-level talks — led by the United States Trade Representative and a designated Chinese vice premier — on the implementation of the first phase.

Contact reporters Denise Jia (huijuanjia@caixin.com) and Lu Zhenhua (zhenhualu@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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